A. How much joint costs would be allocated to Gitchee and to moose milk ice crea

Question

A. How much joint costs would be allocated to Gitchee and to moose milk ice cream using the NRV method?

B. How much joint costs would be allocated to Gitchee and to Moose Milk Ice Cream using the sales value at split-off method?

Problem 9 (8 points) The Superior Company processes unprocessed moose milk up to the splitoff point where two products, condensed moose milk and skim moose milk result. The following information was collected for the month of October: Direct Materials processed: Production: 98,000 gallons (after shrinkage) Condensed moose milk 42,500 gallons Skim moose milk 55,500 gallons Condensed moose milk $3.50 per gallon Sales: $2.50 per gallon The costs of purchasing the of unprocessed moose milk and processing it up to the splitoff point to yield a total of 98,000 gallons of saleable product was $184,480. There were no inventory balances of either product. Condensed moose milk may be processed further to yield 42,000 gallons (the remainder is shrinkage) of a edicinal milk product, Gitchee, for an additional processing cost of $4 per usable gallon Gitchee can be sold for $20 per gallon Skim moose milk can be processed further to yield 54,200 gallons of skim moose ice cream, for an additional processing cost per usable gallon of $4. The product can be sold for $9 per gallor There are no beginning and ending inventory balances.

Explanation / Answer

Solution:

A.

Calculations

Sales (42,000 gallons x $20, 54,200 x $9)

Additional processing cost (42,000 x $4, 54,200 x $4)

Estimated Net Realizable value = Sales - Additional processing cost

Weights = Estimated Net Realizable value/Total estimated net realizable value

Joint costs = Weights x Saleable product amount

B.

Calculations

Revenues (42,500 x $3.50, 55,500 x $2.50)

Percentage (Revenues/Total Revenues)

Allocated joint cost (Percentages x Saleable product amount )

Condensed moose milk Skim moose milk Total Sales $840,000.00 $487,800.00 $1,327,800 Less: Additional processing cost 168000 216800 384800 Estimated NRValue $672,000 $271,000 $943,000 Weighting 0.7126193 0.2873807 Joint costs allocated $131,464.01 $53,015.99

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